Karate school to pay $195,000 to settle suit

Karate school to pay $195,000 to settle suit [For Failure to Register As a Franchise]

11/28/00

ASSOCIATED PRESS

The owner of the Tiger Schulmann Karate Centers, based in Paramus, agreed yesterday to pay New York state $195,000 in penalties and costs to register the school as a franchise in that state.

Daniel Schulmann had been charged by New York Attorney General Eliot Spitzer with violating several state laws, including the state Deceptive Acts and Practices Statute and the Franchise Act. Tiger Schulmann Karate Center is the state's largest karate school with 15 centers. It also has 10 centers throughout New Jersey, as well as schools in Pennsylvania, Connecticut and Florida.

Schulman had denied that the karate centers he operates constituted a franchise, even though 35 centers paid franchise fees, used the same logos and pooled their money for advertising, said Spitzer.

It was not immediately know if similar charges were pending in New Jersey.

The New York settlement requires Schulmann to register the centers as a franchise, offer New York franchisees the option of ending their agreement with Schulmann and provide franchisees a copy of the prospectus of UAK Management Co., of which Schulmann is the sole shareholder, Spitzer said.

In addition, 42 consumers will receive refunds averaging $850. According to Spitzer, students paid an initial fee of $1,500 for 150 classes. High pressure sales tactics were then used to induce them to sign a second contract for 250 classes worth more than $3,500 before the initial classes were completed, he said.

Refunds were not given for unused classes and students could not advance to the next level of instruction without signing the more expensive contract.

Steve Bosyk, a spokesman for the schools in Paramus, said that unused classes from an introductory 100-class contract are actually rolled over to the 250-class intermediate level.

Bosyk disputed the charges, saying only students who perform well and train regularly are offered the intermediate level course before completing their contract. He added that the karate school had agreed to settle the case as an alternative to a more costly lawsuit.

Bosyk said more than 20,000 students had trained in Tiger Schulmann schools over the course of the attorney general's five-year investigation. He said the small number of complaints suggested that the majority of students were satisfied with their experience.